BASIC ACCOUNTING CONCEPT.docx

Time interval concept financial statements both

This preview shows page 1 - 2 out of 2 pages.

Time interval concept - Financial statements (both income statement and statement of financial position) are prepared at regular interval of 1 year. - This is made for convenience of comparison by the users. Going concern concept - We assume that business will continue to operate for foreseeable future, e.g.1 year. - It is not practical to keep all assets updated at the market values, not relevant as long as we do not plan to sell those assets. - Therefore, we will continue to use the historical cost concept for assets valuation. Prudence concept - Accountants will not record revenues as long as it is not ascertained. - Accountants will account expenses even though they are not ascertained. - E.g. revenue – we record in account only when we get confirmation from customers order - If we suspect a debtor become uncollectible, we will account it as expense. Accruals (matching) concept
Image of page 1

Subscribe to view the full document.

- Revenues and expenses are accounted when they are incurred/earned, irrespective of the date of paid/received. - Eg) rent paid = RM11,000, rent due in December = RM1,000, total rent expense = RM12,000 Materiality concept - Level of importance of accounting information. - This depends on the size of the amount. - Material items – record under a separate ledger, eg bought a van RM100,000 - Immaterial items – papers, staples, pens – stationery account.
Image of page 2

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern